- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 6. Simulation Methods
- Subject 1. Lognormal Distribution and Continuously Compounding
CFA Practice Question
You have a nest egg of $750. In order for your money to grow to $946.88, it must be invested at 6% for how many years?
B. 4
C. 5
A. 3
B. 4
C. 5
Correct Answer: B
Years = [Log(946.88/750)]/[Log1.06] = 4
User Contributed Comments 17
| User | Comment |
|---|---|
| dipta | Set P/Y = 1, 750:PV; -946.88:FV; 6:I/Y. CPT N |
| KD101 | Dipta Thanks - it is easier and more consistent to learn than remembering different formulas |
| mark72 | yes these are straight forward examples to do with a financial calc |
| SriSri | Can someone explain why PV is + and FV is - when using Cal pls. |
| jdesine | PV is considered to be the money you are investing. So it is considered as money going out and so is considered negative. On the other hand FV is money coming in so considered Positive. Hope this helps. |
| HeroEarth | I am still having trouble calculating it from Dipta on this. Can someone help me out? I went to P/Y but cannot get out to PV... |
| alallstar | no need for P/Y, at least on the BA II+ PV = -750 FV = 946.88 I = 6 CPT N and you get 4.00 |
| Vikku | SriSri, you are correct: PV must be - & FV +. |
| gazza77 | If you've got a nest egg of $946, my advice is to invest in a gun and a large calibre bullet |
| dcfa | using FV formula, 946.88=750* (1.06)^N 946.88/750 = (1.06)^N take log on both sides log(946.88/750) = N * log 1.06 (using: log (m^n) = n * log m) => N = log(946.88/750) / log 1.06 => N=4 |
| hoyleng | how come my cal shows Error 5.? pls help. thanks |
| harpalani | @Dipta: You have to set PV as -750 and FV as 946.88 in TI BA II |
| Kaloyan | To hoyleng. I suppose you use HP 12 C. First read the manual. :-) Kidding. The reason you are getting the Error 5 is because you input both your PV and FV with the same sign. In this example, your PV should be with a - sign and your FV with a + sign. Hope this is of help. |
| johntan1979 | To be exact, it's 4 years and 3.5 hours ;) |
| chipster | thanks jdesine |
| MattG | @gazza77 lmfao |
| elsaharty | HP12c, Please |